UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 000-24249

Interpace Biosciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware		22-2919486
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

Waterview Plaza, Suite 310, 2001 Route 46, Parsippany, NJ 07054

(Address of principal executive offices and zip code)

(855) 776-6419

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Shares Outstanding August 4, 2023
Common Stock, par value $0.01 per share		4,314,216

INTERPACE BIOSICENCES, INC.

FORM 10-Q FOR PERIOD ENDED JUNE 30, 2023

TABLE OF CONTENTS

		Page No.

	PART I - FINANCIAL INFORMATION

Item 1.	Unaudited Interim Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022	3

	Condensed Consolidated Statements of Operations for the three and six-month periods ended June 30, 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the three and six-month periods ended June 30, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2023 and 2022 (unaudited)	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

Signatures		34

PART I. FINANCIAL INFORMATION

INTERPACE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	June 30,			December 31,
	2023			2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,079		$	4,828
Accounts receivable		5,529			5,032
Other current assets		2,367			2,294
Total current assets		12,975			12,154
Property and equipment, net		606			480
Intangible assets, net		226			861
Operating lease right of use assets		2,090			2,439
Other long-term assets		45			45
Total assets	$	15,942		$	15,979

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,689		$	1,050
Accrued salary and bonus		1,127			1,456
Other accrued expenses		8,391			8,419
Line of credit - current		1,500			2,500
Current liabilities of discontinued operations		858			858
Total current liabilities		13,565			14,283
Contingent consideration		231			518
Operating lease liabilities, net of current portion		1,646			1,848
Note payable at fair value		11,307			11,165
Other long-term liabilities		4,863			4,701
Total liabilities		31,612			32,515

Commitments and contingencies (Note 9)		-			-

Redeemable preferred stock, $.01 par value; 5,000,000 shares authorized, 47,000 shares Series B issued and outstanding		46,536			46,536

Stockholders’ deficit:
Common stock, $.01 par value; 100,000,000 shares authorized; 4,390,826 and 4,367,830 shares issued, respectively; 4,311,414 and 4,296,710 shares outstanding, respectively		405			405
Additional paid-in capital		187,865			187,516
Accumulated deficit		(248,491	)		(249,017	)
Treasury stock, at cost (79,412 and 71,120 shares, respectively)		(1,985	)		(1,976	)
Total stockholders’ deficit		(62,206	)		(63,072	)
Total liabilities and stockholders’ deficit		(30,594	)		(30,557	)

Total liabilities, preferred stock and stockholders’ deficit	$	15,942		$	15,979

The accompanying notes are an integral part of these condensed consolidated financial statements

INTERPACE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except for per share data)

	2023			2022			2023			2022
	For The Three Months Ended						For The Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenue, net	$	11,026		$	7,395		$	20,853		$	15,318
Cost of revenue		4,191			3,565			8,039			6,830
Gross profit		6,835			3,830			12,814			8,488
Operating expenses:
Sales and marketing		2,605			2,551			4,947			4,751
Research and development		186			204			335			435
General and administrative		2,894			2,983			5,389			5,869
Acquisition related amortization expense		318			317			635			635
Change in fair value of contingent consideration		-			(311	)		-			(311	)
Total operating expenses		6,003			5,744			11,306			11,379

Operating income (loss) from continuing operations		832			(1,914	)		1,508			(2,891	)
Interest accretion expense		(31	)		36			(66	)		(85	)
Note payable interest		(228	)		(210	)		(453	)		(390	)
Other (expense) income, net		(174	)		37			(156	)		198
Income (loss) from continuing operations before tax		399			(2,051	)		833			(3,168	)
Provision for income taxes		4			16			8			34
Income (loss) from continuing operations		395			(2,067	)		825			(3,202	)

Loss from discontinued operations, net of tax		(220	)		(1,872	)		(299	)		(2,984	)

Net income (loss)	$	175		$	(3,939	)	$	526		$	(6,186	)

Basic income (loss) per share of common stock:
From continuing operations	$	0.09		$	(0.49	)	$	0.19		$	(0.76	)
From discontinued operations		(0.05	)		(0.44	)		(0.07	)		(0.71	)
Net income (loss) per basic and diluted share of common stock	$	0.04		$	(0.93	)	$	0.12		$	(1.47	)

Diluted income (loss) per share of common stock:
From continuing operations	$	0.09		$	(0.49	)	$	0.19		$	(0.76	)
From discontinued operations		(0.05	)		(0.44	)		(0.07	)		(0.71	)
Net income (loss) per basic and diluted share of common stock	$	0.04		$	(0.93	)	$	0.12		$	(1.47	)

Weighted average number of common shares and common share equivalents outstanding:
Basic		4,311			4,229			4,309			4,219
Diluted		4,316			4,229			4,313			4,219

The accompanying notes are an integral part of these condensed consolidated financial statements

INTERPACE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(unaudited, in thousands)


										Additional
	Common Stock				Treasury Stock					Paid in		Accumulated
	Shares		Amount		Shares		Amount			Capital		Deficit			Total
Balance -December 31, 2021		4,228,169	$	403		32,757	$	(1,868	)	$	186,106	$	(227,059	)	$	(42,418	)

Issuance of common stock		44,139		1		-		-			58		-			59
Treasury stock purchased				-		13,129		(60	)		-		-			(60	)
Stock-based compensation expense		-		-		-		-			325		-			325
Net loss		-		-		-		-			-		(2,247	)		(2,247	)
Balance -March 31, 2022		4,272,308		404		45,886	$	(1,928	)	$	186,489	$	(229,306	)	$	(44,341	)

Issuance of common stock		5,009		-		-		-			-		-			-
Treasury stock purchased				-		1,483		(6	)		-		-			(6	)
Stock-based compensation expense		-		-		-		-			334		-			334
Net loss		-		-		-		-			-		(3,939	)		(3,939	)
Balance -June 30, 2022		4,277,317	$	404		47,369	$	(1,934	)	$	186,823	$	(233,245	)	$	(47,952	)

Balance -December 31, 2022		4,367,830	$	405		71,120	$	(1,976	)	$	187,516	$	(249,017	)	$	(63,072	)

Issuance of common stock		22,996		-		-		-			-		-			-
Treasury stock purchased				-		8,292		(9	)		-		-			(9	)
Stock-based compensation expense		-		-		-		-			192		-			192
Net income		-		-		-		-			-		351			351
Balance -March 31, 2023		4,390,826	$	405		79,412	$	(1,985	)	$	187,708	$	(248,666	)	$	(62,538	)
Balance, value		4,390,826	$	405		79,412	$	(1,985	)	$	187,708	$	(248,666	)	$	(62,538	)

Stock-based compensation expense		-		-		-		-			157		-			157
Net income		-		-		-		-			-		175			175
Net income (loss)		-		-		-		-			-		175			175
Balance -June 30, 2023		4,390,826	$	405		79,412	$	(1,985	)	$	187,865	$	(248,491	)	$	(62,206	)
Balance, value		4,390,826	$	405		79,412	$	(1,985	)	$	187,865	$	(248,491	)	$	(62,206	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

INTERPACE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	2023			2022
`	For The Six Months Ended June 30,
	2023			2022

Cash Flows From Operating Activities
Net income (loss)	$	526		$	(6,186	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		714			1,571
Interest accretion expense		66			85
Amortization of deferred financing fees		28			31
Stock-based compensation		349			613
ESPP expense		-			46
Change in fair value of note payable		142			(160	)
Mark to market on warrants		-			(68	)
Change in fair value of contingent consideration		-			(311	)
Other changes in operating assets and liabilities:
Accounts receivable		(497	)		(288	)
Other current assets		(101	)		(3	)
Operating lease right of use assets		349			549
Accounts payable		610			794
Accrued salaries and bonus		(329	)		278
Other accrued expenses		(138	)		(654	)
Operating lease liabilities		(337	)		(541	)
Other long-term liabilities		162			72
Net cash provided by (used in) operating activities		1,544			(4,172	)

Cash Flows From Investing Activity
Working capital adjustment on sale of Interpace Pharma Solutions		(117	)		-
Purchase of property and equipment		(176	)		(86	)
Net cash used in investing activities		(293	)		(86	)

Cash Flows From Financing Activities
Issuance of common stock, net of expenses		-			59
Proceeds from convertible debt		-			2,000
(Payments) borrowings on line of credit		(1,000	)		1,000
Net cash (used in) provided by financing activities		(1,000	)		3,059

Net increase (decrease) in cash, cash equivalents and restricted cash		251			(1,199	)
Cash, cash equivalents and restricted cash from continuing operations– beginning		4,828			2,922
Cash, cash equivalents and restricted cash from discontinued operations– beginning		-			392
Cash, cash equivalents and restricted cash – beginning	$	4,828		$	3,314
Cash, cash equivalents and restricted cash from continuing operations– ending	$	5,079		$	1,943
Cash, cash equivalents and restricted cash from discontinued operations– ending		-			172
Cash, cash equivalents and restricted cash – ending	$	5,079		$	2,115

The accompanying notes are an integral part of these condensed consolidated financial statements.

INTERPACE BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Tabular information in thousands, except per share amounts)

1. OVERVIEW

Nature of Business

Interpace Biosciences, Inc. (“Interpace” or the “Company”) is a company that provides molecular diagnostics, bioinformatics and pathology services for evaluation of risk of cancer by leveraging the latest technology in personalized medicine for improved patient diagnosis and management. The Company develops and commercializes genomic tests and related first line assays principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer using the latest technology.

2. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of the Company and its wholly-owned subsidiaries (Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation, and Interpace Diagnostics, LLC), and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities & Exchange Commission (“SEC”) on March 27, 2023 and as amended on April 28, 2023.

The Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s wholly owned subsidiaries: Group DCA, LLC, InServe Support Solutions; and TVG, Inc., its commercial services business unit which was sold on December 22, 2015 and its Interpace Pharma Solutions, Inc. business (“Pharma Solutions”) which was sold on August 31, 2022. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.

3. LIQUIDITY

In October 2021, the Company entered into a $7.5 million revolving credit facility with Comerica Incorporated (“Comerica”) (the “Comerica Loan Agreement”). See Note 17, Revolving Line of Credit, for more details. Also in October 2021, the Company entered into an $8.0 million term loan with BroadOak Fund V, L.P. (“BroadOak”) (the “BroadOak Term Loan”), the proceeds of which were used to repay in full at their maturity the existing secured promissory note with Ampersand Capital Partners (“Ampersand”) (the “Ampersand Note”) and 1315 Capital II, L.P (“1315 Capital”) (the “1315 Capital Note”). In May 2022, the Company entered into a Subordinated Convertible Promissory Note agreement with BroadOak for an additional $2.0 million (the “Convertible Note”), which was converted into a subordinated term loan and was added to the outstanding BroadOak Term Loan balance. See Note 14, Notes Payable, for more details.

In January 2022, the Company’s registration statement for a rights offering filed with the Securities and Exchange Commission (SEC) became effective; however, the rights offering was subsequently terminated later in January 2022 when the Company announced that the Centers for Medicare & Medicaid Services, or CMS, issued a new billing policy whereby CMS will no longer reimburse for the use of the Company’s ThyGeNEXT^® and ThyraMIR^® tests when billed together by the same provider/supplier for the same beneficiary on the same date of service. However, on February 28, 2022, the Company announced that the National Correct Coding Initiative (NCCI) program issued a response on behalf of CMS stating that the January 2022 billing policy reimbursement change for ThyGeNEXT^®(0245U) and ThyraMIR^® (0018U) tests has been retroactively reversed to January 1, 2022. In May 2022, the Company was notified by CMS/NCCI that processing of claims for dates of service after January 1, 2022 would be completed beginning July 1, 2022. However, on June 9, 2022, the Company was notified that our local Medicare Administrator Contractor, Novitas re-priced ThyGeNEXT^®(0245U) from $2,919 to $806.59 retroactively effective to January 1, 2022. On July 20, 2022 the Clinical Diagnostic Laboratory Tests (CDLT) Advisory Panel affirmed a gapfill price for ThyGeNEXT^® of $806.59. As a result of the ThyGeNEXT^®pricing change, the Company reduced its net realizable value, or NRV rates, for ThyGeNEXT^® Medicare billing to reflect the $806.59 pricing for tests performed during the second quarter of 2022. In addition, in order to reflect the retroactive pricing change to January 1, 2022, the Company recorded an NRV adjustment of $0.7 million during the second quarter of 2022 to reduce revenue recorded during the first quarter of 2022. Effective January 1, 2023, the gapfill price for ThyGeNEXT^® was set at $1,266.07.

Further, along with many laboratories, the Company may be affected by the Proposed Local Coverage Determination (“LCD”) DL39365, which was posted on June 9, 2022 and is currently under consideration by Novitas. If finalized, this Proposed LCD, which governs “Genetic Testing for Oncology,” could impact the existing LCD for one of our molecular tests, PancraGEN®. On June 5, 2023 the Company announced that CMS issued the final LCD of Genetic Testing for Oncology (L39365) which establishes non-coverage for the Company’s widely used PancraGEN^® test effective July 17, 2023. On July 6, 2023, Novitas announced that it was rescinding implementation of the Genetic Testing for Oncology LCD (L39365) so that it will not become effective on July 17, 2023. Novitas issued a new proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. The Company has been invited to participate in a public meeting presentation regarding the tests in question. The timing and content of any final LCD is uncertain at this time; the process could potentially take a year or longer to reach a conclusion. As a result, the Company is able to continue offering PancraGEN^® and the related Point2^® fluid chemistry tests for amylase, CEA, and glucose. In the event Novitas ultimately restricts coverage for the PancraGEN^® test, the Company’s liquidity could be negatively impacted.

For the six months ended June 30, 2023, the Company had operating income from continuing operations of $1.5 million. As of June 30, 2023, the Company had cash and cash equivalents of $5.1 million, total current assets of $13.0 million and current liabilities of $13.6 million. As of August 4, 2023, the Company had approximately $4.6 million of cash on hand.

The Company may not generate positive cash flows from operations for the year ending December 31, 2023. The Company intends to meet its ongoing capital needs by using its available cash, as well as through targeted margin improvement; collection of accounts receivable; containment of costs; and the potential use of other financing options and other strategic alternatives. However, if the Company is unable to meet the financial covenants under the Comerica Loan Agreement, the revolving line of credit and notes payable will become due and payable immediately. As of August 1, 2023, the Company had $3.4 million available under the Loan Agreement.

The Company continues to explore various strategic alternatives, dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources in order to provide additional liquidity. With the delisting of its common stock from Nasdaq in February 2021, and the possible removal of its common stock from trading on the OTCQX^®if it failed to meet minimum market capitalization of $5 million by July 3, 2023, the Company’s ability to raise additional capital on terms acceptable to it has been adversely impacted. There can be no assurance that the Company will be successful in obtaining such funding on terms acceptable to it. The Company was notified in May 2023 that it had met the market capitalization requirements and was cleared to remain on OTCQX^®.

With the proceeds received from the sale of the Pharma Solutions business, as well as the improvement in operating cash flows associated with the disposition, and the Company’s improved operating performance, as of the date of this filing, the Company anticipates that current cash and cash equivalents and forecasted cash receipts will be sufficient to meet its anticipated cash requirements through the next twelve months.

4. DISCONTINUED OPERATIONS

Liabilities classified as discontinued operations as of both June 30, 2023 and December 31, 2022 consists of accrued expenses of which $766 of liabilities related to the former commercial services business unit.

The table below presents the significant components of its former Pharma Solutions business unit’s results included within loss from discontinued operations, net of tax in the condensed consolidated statements of operations for the three- and six months ended June 30, 2023 and 2022.

	2023			2022			2023			2022
	For The Three Months Ended						For The Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022

Revenue, net	$	-		$	1,956		$	-		$	4,410

Loss from discontinued operations		(137	)		(1,820	)		(137	)		(2,878	)
Income tax expense		83			52			162			106
Loss from discontinued operations, net of tax	$	(220	)	$	(1,872	)	$	(299	)	$	(2,984	)

Cash used from discontinued operations, operating activities, for the six months ended June 30, 2022 was approximately $2.5 million. Cash used from discontinued operations, operating activities, was $20,000, and investing activities was $0.1 million for the six months ended June 30, 2023. Depreciation and amortization expense within discontinued operations for the three and six-months ended June 30, 2022 was $0.4 million and $0.8 million, respectively. There was no depreciation and amortization expense for the three or six months ended June 30, 2023 in discontinued operations.

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for valuation allowances related to deferred income taxes, contingent consideration, allowances for doubtful accounts, revenue recognition, unrecognized tax benefits, and asset impairments involving intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.

Revenue Recognition

Our clinical services derive its revenues from the performance of its proprietary assays or tests. The Company’s performance obligation is fulfilled upon the completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the tests performed. Under Accounting Standards Codification 606, revenue is recognized based on the estimated transaction price or net realizable value, which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. To the extent the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.

For our clinical services, we regularly review the ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates and adjust the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary significantly from our estimates, we will adjust the estimates of contractual allowances, which affects net revenue in the period such variances become known. The Company recorded an NRV adjustment of $0.7 million as a reduction of revenue during the second quarter of 2022 to record the impact on revenue recorded during the first quarter of 2022. See Note 3, Liquidity, for more details.

For our discontinued pharma services, project level activities, including study setup and project management, were satisfied over the life of the contract while performance-related obligations were satisfied at a point in time as the Company processes samples delivered by the customer. Revenues were recognized at a point in time when the test results or other deliverables are reported to the customer.

Financing and Payment

For non-Medicare claims, our payment terms vary by payer category. Payment terms for direct-payers in our clinical services are typically thirty days and in our pharma services, were up to sixty days. Commercial third-party-payers are required to respond to a claim within a time period established by their respective state regulations, generally between thirty to sixty days. However, payment for commercial third-party claims may be subject to a denial and appeal process, which could take up to two years in some instances where multiple appeals are submitted. The Company generally appeals all denials from commercial third-party payers. We bill Medicare directly for tests performed for Medicare patients and must accept Medicare’s fee schedule for the covered tests as payment in full.

Costs to Obtain or Fulfill a Customer Contract

Sales commissions are expensed in the period in which they have been earned. These costs are recorded in sales and marketing expense in the condensed consolidated statements of operations.

Accounts Receivable

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its clinical services and pharma services. The Company’s clinical services are fulfilled upon completion of the test, review and release of the test results. In conjunction with fulfilling these services, the Company bills the third-party payer or direct-bill payer. Contractual adjustments represent the difference between the list prices and the reimbursement rates set by third-party payers, including Medicare, commercial payers, and amounts billed to direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months. Pharma services represented, primarily, the performance of laboratory tests in support of clinical trials for pharma services customers. The Company billed these services directly to the customer.

Leases

The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. Unless a lease provides all of the information required to determine the implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. We use the implicit interest rate in the lease when readily determinable.

Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or liability. See Note 7, Leases.

Other Current Assets

Other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

SCHEDULE OF OTHER CURRENT ASSETS

	June 30, 2023		December 31, 2022
Lab supplies	$	1,177	$	1,224
Prepaid expenses		642		390
Funds in escrow		500		500
Other		48		180
Total other current assets	$	2,367	$	2,294

Long-Lived Assets, including Finite-Lived Intangible Assets

Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization of finite-lived acquired intangible assets is recognized on a straight-line basis, using the estimated useful lives of the assets of approximately two years to ten years in acquisition-related amortization expense in the condensed consolidated statements of operations.

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value measured by future discounted cash flows. This analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary.

Basic and Diluted Net Loss per Share

A reconciliation of the number of shares of common stock, par value $0.01 per share, used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2023 and 2022 is as follows:

	2023		2022		2023		2022
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Basic weighted average number of common shares		4,311		4,229		4,309		4,219
Potential dilutive effect of stock-based awards		5		-		4		-

Diluted weighted average number of common shares		4,316		4,229		4,313		4,219

The Company’s Series B Redeemable Preferred Stock, on an as converted basis into common stock of 7,833,334 shares for the three- and six-months ended June 30, 2023, and the following outstanding stock-based awards and warrants, were excluded from the computation of the effect of dilutive securities on loss per share for the following periods as they would have been anti-dilutive (rounded to thousands):

	2023		2022		2023		2022
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Options		475		641		475		641
Restricted stock units (RSUs)		215		351		217		351
Warrants		-		63		-		63
		690		1,055		692		1,055

6. INTANGIBLE ASSETS

The net carrying value of the identifiable intangible assets from all acquisitions as of June 30, 2023 and December 31, 2022 are as follows:

		As of June 30, 2023			As of December 31, 2022
	Life	Carrying			Carrying
	(Years)	Amount			Amount

Asuragen acquisition:
Thyroid	9	$	8,519		$	8,519
RedPath acquisition:
Pancreas test	7		16,141			16,141
Barrett’s test	9		6,682			6,682

CLIA Lab	2.3		609			609

Total		$	31,951		$	31,951

Accumulated Amortization			(31,725	)		(31,090	)

Net Carrying Value		$	226		$	861

Amortization expense was approximately $0.3 million for both the three-month periods ended June 30, 2023 and 2022, and $0.6 million for the six-month periods ended June 30, 2023 and 2022, respectively. The remaining amortization expense of $0.2 million will be amortized in 2023.

7. FAIR VALUE MEASUREMENTS

Cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their relative short-term nature. The Company’s financial liabilities reflected at fair value in the condensed consolidated financial statements include contingent consideration, warrant liability and note payable. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

	Level 1:	Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

	Level 2:	Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

	Level 3:	Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The valuation methodologies used for the Company’s financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth in the tables below:

					Fair Value Measurements
	As of June 30, 2023				As of June 30, 2023
	Amount		Fair Value		Level 1		Level 2		Level 3

Liabilities:
Contingent consideration:
Asuragen ⁽¹⁾	$	774	$	774	$	-	$	-	$	774
Note payable:
BroadOak loan		10,000		11,307		-		-		11,307
	$	10,774	$	12,081	$	-	$	-	$	12,081

(1)	See Note 10, Other Accrued Expenses

					Fair Value Measurements
	As of December 31, 2022				As of December 31, 2022
	Amount		Fair Value		Level 1		Level 2		Level 3

Liabilities:
Contingent consideration:
Asuragen ⁽¹⁾	$	1,088	$	1,088	$	-	$	-	$	1,088
Note payable:
BroadOak loan		10,000		11,165		-		-		11,165
	$	11,088	$	12,253	$	-	$	-	$	12,253

(1)	See Note 10, Other Accrued Expenses

In connection with the acquisition of certain assets from Asuragen, Inc., the Company recorded contingent consideration related to contingent payments and other revenue-based payments. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

In connection with the BroadOak loan, the Company records the loan at fair value. The fair value of the loan is determined by a probability-weighted approach regarding the loan’s change in control feature. See Note 14, Notes Payable, for more details. The fair value measurement is based on the estimated probability of a change in control and thus represents a Level 3 measurement.

A roll forward of the carrying value of the Contingent Consideration Liability and BroadOak Loan to June 30, 2023 is as follows:

					Transferred			Accretion/		Adjustment to Fair Value/
	December				to Accrued			Interest		Mark to		June 30,
	31, 2022		Issued		Expenses			Accrued		Market		2023

Asuragen	$	1,088	$	-	$	(380	)	$	66	$	-	$	774

BroadOak loans		11,165		-		-			-		142		11,307

	$	12,253	$	-	$	(380	)	$	66	$	142	$	12,081

Certain of the Company’s non-financial assets, such as intangible assets are measured at fair value on a nonrecurring basis when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

8. LEASES

The table below presents the lease-related assets and liabilities recorded in the Condensed Consolidated Balance Sheet:

	Classification on the Balance Sheet	June 30, 2023		December 31, 2022

Assets
Operating lease assets	Operating lease right of use assets		2,090		2,439
Total lease assets		$	2,090	$	2,439

Liabilities
Current
Operating lease liabilities	Other accrued expenses		443		578
Total current lease liabilities		$	443	$	578
Noncurrent
Operating lease liabilities	Operating lease liabilities, net of current portion		1,646		1,848
Total long-term lease liabilities			1,646		1,848
Total lease liabilities		$	2,089	$	2,426

The weighted average remaining lease term for the Company’s operating leases was 4.7 years as of June 30, 2023 and the weighted average discount rate for those leases was 11.8%. The Company’s operating lease expenses are recorded within “Cost of revenue” and “General and administrative expenses.”

The table below reconciles the cash flows to the lease liabilities recorded on the Company’s Condensed Consolidated Balance Sheet as of June 30, 2023:

	Operating Leases
2023 - remaining six months	$	357
2024		575
2025		450
2026		550
2027-2028		825
Total minimum lease payments		2,757
Less: amount of lease payments representing effects of discounting		668
Present value of future minimum lease payments		2,089
Less: current obligations under leases		443
Long-term lease obligations	$	1,646

9. COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time.

Due to the nature of the businesses in which the Company is engaged, it is subject to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products or services that the Company promotes or commercializes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company’s business activities. There is also the risk of employment related litigation and other litigation in the ordinary course of business.

The Company could also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company’s liability exceeds the amount of applicable insurance or indemnity.

10. OTHER ACCRUED EXPENSES

Other accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022:

SCHEDULE OF OTHER ACCRUED EXPENSES

	June 30, 2023		December 31, 2022
Accrued royalties	$	5,680	$	4,909
Contingent consideration		543		569
Operating lease liability		443		578
Accrued sales and marketing - diagnostics		-		40
Accrued lab costs - diagnostics		182		167
Accrued professional fees		505		641
Taxes payable		222		262
Unclaimed property		328		565
All others		488		688
Total other accrued expenses	$	8,391	$	8,419

11. STOCK-BASED COMPENSATION

Historically, stock options have been granted with an exercise price equal to the market value of the common stock on the date of grant, with expiration 10 years from the date they are granted, and generally vest over a one to three-year period for employees and members of the Board. Upon exercise, new shares will be issued by the Company. The restricted shares and restricted stock units (“RSUs”) granted to Board members and employees generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances.

There were no stock option awards issued during the six months ended June 30, 2023. The following table provides the weighted average assumptions used in determining the fair value of the stock option awards granted during the six-month period ended June 30, 2022.

	June 30, 2022

Risk-free interest rate		1.75	%
Expected life		6.0 years
Expected volatility		129.93	%
Dividend yield		-

The Company recognized approximately $0.2 million and $0.3 million of stock-based compensation expense within continuing operations during the three-month periods ended June 30, 2023 and 2022, respectively and approximately $0.3 million and $0.6 million for the six-month periods ended June 30, 2023 and 2022, respectively. The following table has a breakout of stock-based compensation expense from continuing operations by line item.

2023	2022	2023	2022
Three Months Ended		Six Months Ended
June 30,		June 30,

SEC Form 10-Q filed by Interpace Biosciences, Inc.